Anglo American cuts net debt to $11.7 bln, on track for less than $10 bln

* Share (LSE: SHRE.L - news) price extends rally so far this year

* Says can reduce net debt to less than $10 bln by year-end

* Commodity price rally may not be sustained (Adds quotes, detail)

By Barbara Lewis and Mamidipudi Soumithri

LONDON/BENGALURU, July 28 (Reuters) - Anglo American (LSE: AAL.L - news) said on Thursday net debt had fallen and that an aggressive cost-cutting and asset sale strategy was on track, although volatile commodity markets could make the second half of the year challenging.

Of the big miners, Anglo American was one of the hardest hit by a plunge in commodity markets following weaker than expected demand in top consumer China. In response, it cut costs, suspended dividends and put an array of assets on the block.

On Thursday, the firm said it had cut its net debt to $11.7 billion by the end of June from $12.9 billion at the end of December.

"The decisive actions we have taken to strengthen the balance sheet put us well on track to achieve our net debt target of less than $10 billion at the end of 2016," Chief (Taiwan OTC: 3345.TWO - news) Executive Mark Cutifani said in an interim results statement.

Anglo American's share price rose around 7 percent in early trade and was around 4 percent higher by 1155 GMT, outperforming the sector and extending a rally of well over 150 percent since the start of the year.

In terms of asset sales, Anglo American has so far agreed to sell its Brazilian niobium and phosphate units for $1.5 billion and said it expected to complete that deal in the second half.

In all it is trying to sell $3 billion to $4 billion of assets in 2016, including its iron ore, coal and nickel units.

Cutifani said the focus was on achieving value for assets, even if that meant sales took longer. Meanwhile, the drive for cost-cutting continued and innovations could result in further "step changes".

Anglo American lowered copper equivalent costs by 19 percent compared with the first half last year, bringing the total reduction since 2012 to 36 percent, Cutifani said.

"We're going to keep the pressure on. We have a strategy. We have been very clear. There is no change," he said in a conference call.

Group underlying earnings before interest and tax (EBIT) of $1.4 billion was a 27 percent decrease year on year because of weak commodity prices. Core earnings (EBITDA) were 2.5 billion, a 25 percent fall, beating consensus forecasts.

The De Beers diamond unit stood out with a 2 percent rise in underlying EBIT to $585 million, following higher revenues from rough diamond sales and favourable exchange rates.

Bruce Cleaver, appointed CEO of De Beers earlier this year, said in a phone call the first half had succeeded in overcoming the difficulties of 2015. But second half rough diamond demand tends to be weaker because the first half is boosted by restocking following Christmas sales.

Despite uncertainty over whether a recovery in most commodity prices can be sustained, analysts said Anglo American's strategy was working and there was less pressure for early asset sales.

"It's steady as you go. They remain focused on what they had intended to do," Hunter Hillcoat, analyst at Investec (LSE: INVP.L - news) , said.

(editing by Susan Thomas and Alexandra Hudson)